Nation pays a dear price for oil habit

April 14, 2005|By Gordon Chipman

AS THE ECONOMIC and strategic reasons for the United States to reduce its foreign trade deficit become more pressing, our nation's growing reliance on imported oil and natural gas becomes even more threatening. Not only is our foreign-oil habit keeping us hostage to unstable and unreliable countries in the Middle East for our energy supply, it is also forcing us to export hundreds of billions of dollars a year that could otherwise be helping our economy. This is causing a heavy drain on our dollar and our standard of living.

President Bush has called for more American coal, nuclear power and renewable energy sources to lessen U.S. dependence on foreign fuel. The administration is correct in doing so, but its policy should be broader. America's huge trade imbalance - and our dependence on foreign energy suppliers - is not likely to decline soon unless we decrease our reliance on oil by tightening fuel economy standards for cars and light trucks.

Americans consume about 20 million barrels of oil daily, but only 8 million barrels are produced in the United States. Most of the oil we use, largely in the form of fuel for cars, trucks and planes, comes from foreign countries such as Saudi Arabia, Venezuela and Nigeria that are members of the Organization of Petroleum Exporting Countries. We pay more than $54 a barrel for it, compared with $15 a barrel only six years ago - nearly a quarter of today's levels. It costs only $1 to $2.50 per barrel, at the most, to pump oil in the Middle East.

We are feeling the impact of higher oil prices. Because the United States imports about 4 billion barrels of oil annually, every $10-per-barrel rise in the price of oil diverts $40 billion of U.S. income to foreign countries. Last year, U.S. payments for foreign oil accounted for a quarter of the record $617 billion trade deficit, nearly 25 percent higher than the deficit in 2003.

We are also importing greater amounts of natural gas - now about 17 percent of U.S. demand - mainly because more of it is being used as fuel to produce electricity. This also adds significantly to our trade imbalance. The trade deficit now accounts for more than 5 percent of the U.S. economy, depressing the value of the dollar and placing a huge burden on American families.

Growing dependence on foreign oil continues to pose a grave danger to our national energy security, because the world's largest oil and gas reserves are in the politically volatile Middle East. The cost of defending oil facilities in unstable countries adds billions of dollars of hidden costs to America's oil dependence burden.

Greater use of U.S. energy sources can help stem the increase in oil imports by replacing the direct burning of oil in industry with electricity. Clean nuclear power plants, for example, can be used to provide power for more "plug-in" hybrid-electric vehicles and electrified rail in rapid transit systems.

But the greatest and most immediate savings will come from improving the efficiency of our nation's vehicles. There are about 200 million cars and light trucks (including SUVs, minivans and pickups) on American roads, and there can be substantial savings by requiring improvements in gasoline mileage.

It's estimated that a 25 percent increase in efficiency standards, now set at 27.5 miles for cars and 20.7 miles for light trucks, would reduce consumption by more than 1 million barrels a day. Lack of progress on miles-per-gallon standards, which have not risen since 1988, is much of the reason that the fuel economy of the U.S. fleet is near its lowest level in two decades.

Instead of continuing down this dangerous path, the United States needs to require automakers to build more-efficient vehicles. California is doing just that. Gov. Arnold Schwarzenegger is supporting a state regulation that would force a 30 percent reduction in the amount of carbon dioxide and other greenhouse gases emitted by cars and light trucks sold in the state. That translates into a mandate that automakers boost the fuel economy of their California fleets by at least 20 percent. Congress should impose the same mandate nationally. It would strengthen U.S. energy security, save consumers billions of dollars in reduced gasoline costs, provide cleaner air and help control global warming gases and lessen the nation's trade deficit.

Over the long term, new electricity-generating technologies such as advanced nuclear power, coal gasification plants and wind turbines will begin replacing oil in many of our uses, including transportation. More immediately, the cost of switching to more-fuel-efficient cars would be cheap when you factor in the true cost of foreign oil.

Gordon Chipman, an energy consultant, was a deputy assistant secretary in the Energy Department from 1982 to 1985.